The valuation is one of the most important parts of getting a mortgage. It confirms if the property you’re buying or remortgaging is worth the amount stated. But what happens during the valuation to mortgage offer? Here, we’ve got the lowdown on what you can expect, including valuable insight from a Molo team member who leads on completions.
What is a mortgage valuation?
A mortgage valuation is an assessment conducted by a lender to determine the value of a property before approving a mortgage loan. It’s a basic survey that ensures the property is worth the price being paid and is suitable security for the loan. The valuation uses available data or an independent survey and considers factors like property size, condition, location and comparable market prices. It’s primarily used for the lender’s benefit to mitigate their risk.
However, mortgage valuations can also be helpful for you as they provide an indication as to whether you’re paying too much or too little for the property. For example, if you agree on a price of £250,000, but the surveyor believes the property is worth £200,000, you’ll know that potentially, you’re overpaying. That would mean overpaying by 20%, though it’s unlikely the lender would offer a mortgage on an overpriced property.
Traditionally, lenders instruct a surveyor to visit the property and conduct a valuation. That changed in the aftermath of Covid, with an increasing number of automated valuation models (AVM) to determine the property’s value due to restrictions on physical interactions. However, they proved so popular that many lenders now use these as the primary way to conduct valuations.
A digital survey consists of sales data provided by companies like Rightmove, who have, over the years, provided highly accurate data. Many lenders now use it as the primary way to see how much the property is worth.
There may, however, be some occasions where a digital valuation isn’t enough, and the lender needs to send a surveyor to the property. An example of this involves a property where the construction isn’t a standard material, and the surveyor needs to see if it could pose any potential long-term issues.
A mortgage valuation isn’t the same as a house survey, otherwise known as a homebuyers report. Whereas the valuation is for the benefit of a lender, a house survey is a more comprehensive examination of the property’s condition and structure. It’s typically carried out by a qualified and independent surveyor who works on behalf of the prospective buyer, although some lenders will offer both standard valuations and homebuyers report.
Some mortgage valuations are free; others can be as much as £1,500. Mortgage valuation costs are typically determined by the sale price of the property. The higher the property price, the more you may need to pay for the valuation unless it’s offered for free.
75% loan to value mortgages
- Borrow up to 75% of the property’s value
- Get a mortgage as an individual or limited company
- An online mortgage application that takes place entirely online.
Mortgage offer
What is a mortgage offer?
Assuming the mortgage valuation comes back at the agreed sale price, and all other requirements are met, you can expect to receive a mortgage offer from the lender. The offer is proof that your application was approved and is usually valid for between three to six months.
You’ll need to complete the application process to get a mortgage offer. This typically involves providing information relating to your address history, finances and credit score. You will often need to provide proof of:
- Source of deposit
- Income (utilised less for buy-to-let properties than residential properties)
- Employment information
- Your Identity
Details about the property will also be required so the lender can carry out the valuation report. The majority of lenders tend to offer a mortgage within days of receiving the valuation report.
A MIP, otherwise known as a ‘mortgage in principle’, is an estimation of how much you could borrow. It doesn’t involve a hard credit check – only a soft one and basic information from the potential applicant. MIPs are great for showing estate agents and sellers that you’re serious, and you could potentially borrow the MIP amount if the information you entered is correct. But it’s only the mortgage offer that acts as an official final lending decision.
Many factors go into the length of time it takes to get an offer, including how quickly you provide the information, the speed at which the lender operates, and whether the valuation is desktop or physical. If, for example, you use an online mortgage lender like Molo, the process will be faster as there are no appointments or paperwork involved. Everything happens digitally, which significantly speeds up the time it takes to offer a mortgage.
Once the mortgage valuation for a buy-to-let property has been completed, the lender assesses the results to see if the property is suitable security for the loan. During this stage, the lender also evaluates the rental income potential against the mortgage repayments. If satisfied, the mortgage provider will issue a formal mortgage offer. This stage can involve further queries or checks, and the time taken varies depending on the lender and complexity of the application.
If you’re happy with the offer, you can begin the final phase of buying your new property. The solicitor will liaise with the lender about receiving the mortgage funds and set a date to exchange contracts. All that’s left for you to do is get excited about getting the keys to your new buy-to-let.
Mortgage valuations with Molo
As a digital mortgage lender, Molo leverages technology to streamline the application process whenever possible. While completing your mortgage application, Molo conducts automated, digital valuations on the property. If sufficient online data indicates the property’s suitability, we may not need to instruct a surveyor.
When does the mortgage valuation happen within the application process, and how long does it take?
If automatic property valuations aren’t possible, we will email you after an underwriter has reviewed your application for the first time. To proceed, you’ll need to pay a fee and confirm access details, which ensures that a qualified surveyor can contact the appropriate person to schedule a date for the survey. Once we receive the access details and payment from you, the survey is typically booked and completed within a week
Learn more about buy-to-let mortgages:
75% loan to value mortgages
- Borrow up to 75% of the property’s value
- Get a mortgage as an individual or limited company
- An online mortgage application that takes place entirely online.
Final thoughts: understanding your mortgage valuation
With an AVM, you can get a decision faster and potentially access the money needed for your next property sooner. But even when more details are required, a physical valuation can step in to determine the property’s value. Understanding how a mortgage valuation works will give you more transparency over the process and hopefully lead to a smoother mortgage application.
If you’re looking to purchase a rental property, be it your first, third or tenth, we can help with our entirely online mortgages.
The process takes place online, from the mortgage in principle to going through the application and getting your mortgage funds. There’s no paperwork or appointments, and getting a mortgage online is faster and more convenient than traditional methods. In fact, landlords looking to remortgage can do so within as little as 24 hours.
Find out more about how Molo works and why your next buy-to-let mortgage should be with an online lender like us.
